Are you planning on buying a home in London anytime soon?
Well here are some real estate tips for first time home buyers in London.
More and more people are moving in London every year, being that it is a popular destination and a very culturally diverse city.
Undeterred by the widespread misinterpretation of first time home-buying speculations, people right now are owning homes effortlessly.
There are initiatives that have made it their ambition to help first time home buyers own homes in no time, and also move current home-owners up the property ladder.
The best part is, you get to choose from a wide array of quality homes and style of architecture i.e.
- Georgian – built in between 1714 and 1830, linked with classical period of Rome and Greece.
- Victorian – built from the 19th century and has become quite popular in these times.
- Edwardian – during the era of King Edward VII, with a much more subtle approach compared to the Victorian architecture.
- Art nouveau – meaning ‘new art’, it is only common in London.
- Cottages – classic old with a restricted height.
- 1930s – during the 20s and 30s and it the most common style in the suburbs of London.
- Mansion blocks – purpose-built apartments in the late 1800s.
- Modern – came out of a desire to introduce something different other than the historical architecture that had overrun London housing.
Wherever you choose to buy a home in London, you will have a bunch of boroughs to pick from as they are quite a number with wonderful transportation links.
The whole home-owning process requires a lot of decisions to make and that is why we are here to make some of those decisions easy to make.
The first decision is to decide whether you want to own a home or rent; which is an option many prefer to begin with to test run what amenities they might require along the way, or how many rooms they might need for their final home.
Once you have decided you want to own a home, the second step is deciding on the budget.
Having a conversation with home-owning initiatives will help a lot in regards to how much mortgage you are qualified for and deposit required.
A conversation with loan advisors is crucial to know how much you qualify for with its terms and conditions to have a clear picture of how it is going to impact your finances and plans.
You can also easily estimate your payments using an online calculator.
Your budget should certainly include stamp duty that is exceptionally higher in London than anywhere else in UK.
There is however an exempt for first time home buyers in London who purchase a home for a certain price. Contact Stamp Duty Land Tax experts to know more before making a decision.
This guide catalogs all the critical tips you have to consider before buying or investing in a home, especially for first-time home buyers in London.
The London market has so much to offer that you need to find the right fit for you, for you to fit in.
What Is The Best Area To Buy Property In London?
London is ranked #17 in the best cities to live in, in the world. It is divided in regions and sub regions which are:
- North London
- South London
- West London
- East London
- Central London
- North East London
- North West London
- South East London
- South West London
Picking the best area to buy property in London will depend on many factors and your circumstances and different advantages are provided in various areas. Some of these factors include:
- Your work in regards to the distance from your home to your work place
- Your financial status since different neighborhoods have different price ranges considering the convenience and modernity.
- Marital status such that someone married with a family fits in a certain neighborhood that is full of children activities, and a wonderful community spirit.
In conclusion, the best area to buy property in London is one that provides for you in terms of your wants, needs and favors your circumstances.
Bexley is a London borough in the South East of London, sitting on the border. It is noted as one of the cheapest areas to live in and the second safest borough in London.
Being a really quiet space with a low key night life, it is suitable for families that prefer the peace and quiet, especially old retired couples.
It is an outstanding choice for families and first time house buyers.
b) Barking and Dagenham
Similar to Bexley, Barking and Dagenham is also home to cheap and averagely priced property.
Being only nine miles from the city, it will still deliver the whole buzz, rush and urban feel of the city.
It is the best area to buy property for anyone who desires a much younger, diverse and closely integrated community. It also shares the second position as one of the boroughs with the lowest crime rates.
It is one of those most vibrant and exciting boroughs, housing all kinds of people, all kinds of trendy vibes, especially celebrities which also means, your salary has to be on the high end if you are looking to buy a property in Camden.
If you are well off and looking for an area with fashionable vibes, Camden is the best for you. It has both the urban, densely populated side of it, and the suburban side with lots of green if that is your cup of tea.
With world-class schools and hospitals, well developed roads, modern service industries that are good in creating job opportunities, it is easy to love this part of London.
It houses all architecture styles and housing and has been voted to be the fourth most expensive London boroughs.
This borough has been named the happiest place to live in London. With its fresh open spaces, parks, tree-lined streets, period homes, it makes it also an expensive borough to live in. It is best in terms of environment, facilities, safety and access.
Hampstead houses the most millionaires as compared to any other area in London. Aside from its expensive housing and affluent living, it is also known for it artistic, liberal and intellectual qualities among the people.
The West side of Hampstead still accommodates the village feel for those after the benign idyllic atmosphere.
f) High gate
Although it is viewed as one of the posh areas, it is nestled in a suburban area on the North of London, surrounded by green environs.
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This makes it a leafy rural haven, and yet a hang out spot for the rich kids. With property averaging around £10m, High gate is not different from Hampstead.
They both are very expensive boroughs to buy property in.
g) Bethnal green
Bethnal green is on the East end of London. It is a relatively affordable neighborhood with fill of professionally working young people and working class families.
It has a significantly good night life making it popular among young people with so much energy. Because of this popularity among young people, they have occupied the most parts of the area.
It is definitely cheaper staying with a roommate which is not a problem among young people. Commuting to the city usually takes an average of 20 minutes to 30 minutes.
Shoredich is on East end of London. During the Elizabethan era, it was a significant entertainment spot birthing the English theatre and today it houses some of the best bars and night clubs.
If you desire the more industrial side of it, then central Shoredich is the one for you. It is filled with Victorian storehouses and industrial buildings and it has become more popular with various industries. The whole of Shoredich gives a more artsy and fashionable vibe with tons of street art.
With its proximity to the city and just about everything good and a lot of opportunities, it can be quite expensive, although a few properties can be relatively affordable.
Clapham has a number of middle class people and families and young professionals flocking in it. It is a gentrified area on the south of London with a proximity to somewhat expensive areas.
Most families have been migrating to Clapham over the years due to the access to better schools, the vast green, nice cafes and restaurants that are child friendly and the architecture styles that include Victorian and Edwardian style.
Royal borough of Greenwich is a borough on the South East of Greater London that includes three main town centers; Greenwich, Woolwich and Eltham.
Life in Greenwich is not cheap as everything from gas prices, transportation fares to property prices is significantly higher than most places.
For this cost though, it provides quality amenities, both an urban and suburban feel, fast access to the city, and a family friendly space with an old fashioned sense of a community spirit. It has both the affluent side of it and the highly affordable side.
Brixton is a relatively cheap area to buy property. It can provide the affluence and it was voted to be one of the coolest places to live by the Times in 2013 but it is rather inexpensive compared to the rest.
If you seeking to live a quiet life, Brixton may make that hard since it has really energetic people, a vibrant night life and a full normal day of buzz.
l) Kensington and Chelsea
It is well known that the Kensington palace is the home of the Duke and Duchess of Cambridge and a few other members of the royal family.
It is a tree-line area housing famous personalities so you will have quite distinguished neighbors.
You can therefore hope for some really outstanding accommodations that will obviously take a toll on your wallet.
Assuming money is not the issue, Kensington and Chelsea will provide some really good opportunities for you and your family, a break from the hustle and bustle of everything in their serene and beautiful parks and gardens and a neat proximity to museums.
m) Notting hill
Notting hill is without a doubt one of the best neighborhood ever. It is a high-end fashionable and trendy residential area with nothing to offer but all things bright and beautiful.
It hosts the greatest street festival ever in Europe known as the Notting Hill carnival that takes place every August bank holiday weekend.
If you want a neighborhood that is instagrammable, bumping into a celebrity every now and then, hop in Notting hill.
Mayfair is more or less like Knightsbridge which is its long lived rival in terms of the most expensive area in London.
It is one of the most affluent areas, providing an arena for the vastly wealthy. For anyone looking for something posh and relaxing,
Mayfair will work for you as long as your income is on the high-end.
Taking a break from the very posh areas to buy property in, Croydon provides impressive transportation links that head to all parts of London but very affordable housing which makes it stand out.
The South of this borough has proven to be safe and pleasant with cheap property. The safest neighborhoods in Croydon are Whitgift and Parkhill.
How Much Deposit Do I Need to Buy a House In London?
A deposit is a percentage of the purchase price of a property that comes out of your pocket. It is the first payment you make for a property as the rest of the money comes through later as a loan from a bank or elsewhere.
In some cases, the least percentage of the deposit needed is at least a 5% deposit of the property price. It is the least amount of deposit you can get which can be not as favorable to you to the lenders since sometimes they might ask you to contribute more depending on a few factors.
These factors may include your circumstances (for example you financial status, if you are in the country on a visa) if you are self employed or not, if you are a first time buyer or not, your credit history, intended usage of the property, property type and construction of the property where if you are buying a to let, the deposit might go up to 24 deposit.
The 5% deposit will mostly apply on some of the affordable boroughs of London like Bexley, Croydon, Newham, Greenwich and Barking and Dagenham.
They are some of the cheapest parts of London that you can get a 95% mortgage plan with an income salary £67,122.14 in average.
If you are buying an existing resale home, you might get the offer of a 5% deposit.
- You only need to put down a small amount which is easier to get and faster to save for. Especially if you are moving in with someone else or there is shared ownership your deposit is going to be 5% of your side of the ownership fee and not the full amount.
- There are plenty of mortgage lenders ready to offer a 95% value to mortgage.
- With a 5% deposit, the rates will be much higher compared to the rates paid on a 10% or 15% deposit.
- The less deposit you put down, the less the mortgage lender will lend you.
A 10% to 15% deposit is recommended since it will give you better rates with your mortgage lender and the mortgage value, while giving you a bigger equity share.
What is most important to note is, if your deposit is bigger, then your mortgage interest rates and your monthly payments will be lower.
It also betters your chances of getting your mortgage approved.
How To Buy a House in London With Low Income
People trying to purchase a house for the first time in London need to have quite a budget with them. There are however, houses that cater for everyone’s needs and budget in that you can invest less and get a satisfactory and modest house for you and your family.
There are a few home developer firms that help first time buyers with jobs get affordable housing.
The following are some of the few ways to buy a house in London with a low income;
Shared ownership, also known as equity sharing, has been a way to help a lot of people get on the property ladder with low income, for the longest time. In London, to be eligible for the shared ownership scheme, you must be earning less than £90,000 and not have another property in any other country or some other part of UK.
Once you are eligible, you are required to put down a deposit of the share you are paying and not the full value of the property.
The rest is the same as every other property owner where you pay your mortgage monthly for the part of property you bought and the rent of the part of the property being rented.
To answer a commonly asked question, you can get to fully own a property that is under shared ownership down the line.
If your finances change along the way, you can then buy more shares for your house or fully purchase it and your mortgage increases.
2. Federal Housing Administration government scheme
The FHA scheme is a government program that qualifies people who are not qualified for a loan due to a low income, low credit score or a poor financial situation.
The loan is insured by the government and because of this, banks are more willing to out down a loan to a home buyer.
FHA loans are an affordable and most viable option to a first time home buyer in London.
3. Help to buy scheme
It is also a government scheme that helps first time buyers trying to buy a property get a satisfactory property with just a 5% deposit.
The government lends you up to 20% of the purchase cost of the property through an equity loan.
The government loan is usually interest free for the first five years.
The London help to buy is available in all the thirty three boroughs with a maximum price limit of £600,000.
4. Buy property with someone
This is yet another way to get to the property ladder soon enough. You only need to look for someone you can buy the house with and you just need to save up half of the amount.
Each tip has sacrifice and in this, you have to learn to live with someone else, a friend or a family member.
It is one of those life talks because you do not want to walk in this without a proper conversation when you both have something as big as payment of mortgage which could get your house repossessed if one of you fails.
5. Make yourself liable for a mortgage
As obvious as this sounds, it is the way for most people moving to London hoping to get their dream home immediately.
To be qualified for a mortgage directly from the mortgage lenders, you need to be earning a certain amount.
For one earning a low income and will take quite a while before they have saved up enough to buy their dream property, they need to get themselves liable for a mortgage and can pay up with time.
Get yourself a specialist mortgage broker who will make your application look good and advise you on which lender might accept you.
This is because even if your income is low, you might have savings from side hustles or some other situation that sources you money.
Mortgage lenders tend to consider your income but with the help of a mortgage broker, you can make yourself valid for a mortgage even with a low income.
Make a sacrifice to earn up to a certain amount that will get you qualified for a loan from the mortgage lenders.
Cut up on luxuries immediately for only a certain period of time and be realistic about the kind of property you want.
Once you get this done, saved up enough and have put down the agreed deposit, the mortgage value cost can be paid with time till you fully own your own home.
To qualify for a mortgage, they will assess the following
- Assets – other things that could bring in money or provide financial stability.
- Income – this is your usual and steady cash flow.
- Credit – a report to ensure a favorable credit history.
- Deposit – how much you can initially put down coming out of your pocket or how much you have been able to save.
Broad Tips and Tricks for First Time Home Buyers in London
- On top of knowing what kind of a house you want, location and features that fit your needs, you need to be aware of your credit score.
A credit score is a measure of credit risk, usually for a consumer, calculated from credit information using a standardized formula.
It will be used to measure your financial health. So make sure you contact your creditors to update your financial records and have them verified.
Doing this, caters for the most crucial step which is knowing your budget to figure out what kind of mortgage you can afford.
- Complete a document check to make sure everything is up to date and matches up. Go through all the records early enough so you may have time to identify and iron out any issues.
- Review different types of mortgage plans and rates. To find the best mortgage rates in London and gauge your mortgage affordability, use mortgage calculators, also known as home loan calculators where you type in details of your net income and other credit numbers and commitments.
The calculators will calculate your monthly principal which is the amount you borrowed and are paying back, the interest rates over the mortgage.
Some of the most important details you need to key in a mortgage calculator are:
- The property purchase price
- Your preferred down payment
- The mortgage loan term or period
- Interest rates
More comprehensive and advanced calculators will factor in some more thorough inputs.
Always look for a mortgage calculator with more detailed inputs for a more detailed and precise conclusion since they do not always include all monthly costs.
A mortgage calculator is also as accurate as the numbers you feed it, so do your research and know your numbers before it does.
The mortgage calculator websites incorporate calculators for every country which includes UK.
- Hire a reputable realtor, and it costs you nothing for they are compensated from commissions.
Make sure you hire or contact a trusted mortgage broker to make the deals between you and mortgage lenders.
Every mortgage lender ever will insist on speaking directly with a mortgage broker working with you.
These mortgage brokers will mostly get their pay from the commissions they get from the mortgage lenders but some will charge for their time and their advice which is crucial for they have seen a lot go through the same process.
It will either cost you nothing at all or cost you a neat fee.
- Finalize with a thorough inspection of the property before closing all deals.
- Get a home buyers protection insurance that will protect you when the seller changes their mind after having spent money on hiring various agents or where there is a risk of losing a lot of money.
There a few factors that will distinguish how much you have to pay for a first time home buyer protection insurance and they are:
- Home value of the property you are buying in that the more expensive the value of the property is, the higher the amount you have to pay for insurance.
- The location of the property is also of consequence in regards to how much to pay for insurance. People in different towns and addresses pay different amounts because it depends on how close the property is to safety markers e.g. a fire station, or the safety of the neighborhood where if the crime rate is high, then the premium rates are as high too.
- Personal information like your age, marital status or credit score.
- How much coverage you want and what type of coverage will determine how much you get to pay for insurance since additional coverage will automatically increase your premium fee.
- The amount of deductible (the amount you pay for the coverage plan before the insurance starts to pay, which is usually out of your pocket) will determine how much rates you pay. If you pay a higher deductible, the premium rates will be lower.
- Having two personal allowances favors you and saves you a lot of constraints. If you are able to buy a property as a couple with a joint income, it is better.
Depending on the amount both of you earn and the type of property in what borough will require you to have your salary on the higher end if you want something flashier.
- To save up on cash, you could look around for property on the areas that provide opportunities to seek out older properties in need of some love. It also presents a chance of doing up the property the want, in your preferred taste.
Once you’ve moved in, you could take time to fix it up gradually.
- Again, if you plan on saving up and living on the affordable side of London, the Greater London is perfect for you. Greater London is a ceremonious county of England, covering a part of London.
The areas towards Kent of Essex will provide both a life and access of London and affordability.
Victorian homes are more popular among house hunters these days as mentioned before, so if you are buying a Victorian property, a full structural report is definitely highly recommended.
Conclusion: Real Estate Tips For First Time Home Buyers in London
If you have sufficient income or assets, it is by far easier and cheaper to buy a house than to rent one in London. Mortgage gets easier to pay and rent prices go up every time because it is a fixed amount.
Before making this major life decision, do a lot of research on all your prospects to know your facts. It is the reason why this article is here.
However, do more and visit these places to get a feel of them and understand their value first hand. What you cannot experience or feel beforehand, we come through.
I hope you found this article on real estate tips for first time home buyers in London.
Now I would like to hear from you.
Which part of London would you like to buy your first home?
Let me know in the comment section below.